Bill and Melinda Gates are to lead a wholesale review of their investments, which could lead to them shifting billions of dollars out of companies that are socially irresponsible or harm human health.

The announcement comes after a major investigation by the Los Angeles Times discovered that some of the billions spent by the Gates Foundation on improving health in the developing world came from its investments in companies that caused illness and disease through pollution and exploitation.

The foundation refused to comment in detail on the allegations but, in an interview yesterday with the Seattle Times, its chief operating officer, Cheryl Scott, said the foundation was rethinking its investment policy.

Because of the size of the foundation's investments - its endowment was $35bn (£18bn) at the end of 2005 before Warren Buffett said he would add some $31bn - any decision to invest more ethically would have a substantial impact and encourage other philanthropic foundations to look at their practices.

Ms Scott denied the move was a response to criticism, but admitted the foundation's current method of investment was "not 100% effective".

She said this year, for the first time, the foundation would conduct a systematic review of its investments, led by Bill and Melinda Gates, to find out if "there are cases simply where the situation is so egregious it will cause us not to invest".

The Los Angeles Times estimated at least 41% of the foundation's assets came from companies whose business operations were at odds with its philanthropic work. They include BP, in which it had $295m of stock in 2005, and Royal Dutch Shell, in which it has a $35m stake.

The two oil companies jointly own the Sapref refinery, outside Durban in South Africa, which is blamed for 24 significant spills, pipeline ruptures and explosions since 1998. With the Mondi paper mill (owned by Anglo American, in which the foundation has a $39m investment), it is held responsible for significant air pollution by toxic fumes. Two studies have found high levels of breathing problems and asthma in local children, largely attributed to sulphur dioxide and other pollutants.

In the same area, the Los Angeles Times points out, the foundation is funding studies into a microbicide which could help protect women and their future children from HIV. But the foundation invests in pharmaceutical companies which have lobbied hard to prevent affordable copies of their Aids drugs being manufactured by generics companies in India. One company, Abbott, makes a drug called Kaletra, which doctors say is essential for patients in Africa for whom basic drugs no longer work. Although Abbott has dropped the price in Africa, it nevertheless costs $500 a year in Nigeria and is not affordable.

Mr Gates says his first priority is stopping Aids and has put huge sums into vaccine research. But substantial sums of that money come from companies such as Abbott. The foundation holds $169m of Abbott stock.

Until now the foundation's financing and philanthropic arms have been totally separate. Its policy has been simply to raise as much money as possible for its scientifically focused philanthropic works, with an emphasis on finding vaccines and other medical breakthroughs that could substantially improve the health of the world's poorest people.

Questions asked

· The Gates Foundation has invested $423m in some of the companies responsible for burning gas flares in the Niger Delta: Eni, Royal Dutch Shell, Exxon Mobil, Chevron and Total.

· It has also invested $39m in Anglo American and $295m in BP, who along with Shell are accused of air pollution at an oil refinery and a paper mill near Durban, South Africa.

· It has invested in a US healthcare firm that is paying $1.5bn to settle cases of medical lapses and fraud, and chocolate companies accused of profiting from child slave labour.